Saving the downstream oil sector

By Odita Sunday
As a Nigerian, I am perturbed at the alarming rate of job losses especially in the downstream sector of the oil industry. The effect of the ‘shaking’ in the downstream sector has also triggered massive job losses in the banking sector and others.
Recently, a major oil company sacked someone I know who spent all his youth working for it, following ‘downsizing’ of its workers.
The worst hit in the retrenchment are companies owned by Independent oil marketers. Over 10,000 Nigerians have reportedly lost their jobs due to the resolve by the government and the Nigerian National Petroleum Corporation (NNPC) to starve independent oil marketers of petroleum products, through scarcity of Foreign Exchange.
The Independent Marketer Programme was a result of the petroleum products shortage of the 1970s, which was partly attributed to lack of sufficient investment by the major oil marketing companies in petroleum retailing outlets, especially in the rural and distant areas of the country.
Consequently, in 1979, the indigenous independent marketers scheme was established to increase the number of outlets, particularly in the rural areas and to permit the direct participation of Nigerians in the petroleum marketing and distribution business.
Currently, over 1,500 independent marketers spread all over the country are registered with the PPMC to lift products from all the depots.
Today, most, if not all the independent marketers, have been complaining about the decision of the government to starve them of oil products. Like previous governments, the present administration should recognize that Independent marketers have the largest number of retail outlets (petrol stations) when compared to the major marketers. It is reported that the present government favours the majors in product allocation for inexplicable reasons.
Unfortunately for the independent marketers, the umbrella body that represents their interest, Independent Petroleum Marketers Association of Nigeria (IPMAN), has broken into two factions and the disunity is adversely affecting their primary role and stopping them from taking up this unfortunate development forcefully.
The past few months have been terrible for the independent oil marketers. Most Independent marketers have reduced their staff and some have closed down their stations, thereby increasing the number of Nigerians thrown into the job market. How could President Buhari feel unconcerned when his fellow countrymen are losing their source of livelihood?
To worsen matters, there are Independent marketers that have obtained bank facilities to develop their outlets, and now their businesses are now in default. The affected banks are now harassing them for loan repayments.
It has been observed that the ongoing restructuring of NNPC appears to be in consonance with the provisions of the Petroleum Industry Bill (PIB) which provides for, among others, the ‘unbundling’ of the corporation and creating autonomous corporate entities that will be allowed to operate purely as companies in the private sector. This is a very positive development. However, in so doing, the Hon. Minister of State for Petroleum/GMD, NNPC should also adopt and follow the true spirit of these Industry reforms by creating a more level playing field for all participants in the downstream sector, generally.
That policy directive will allow for a more positive outlook going forward, since there is no way NNPC through PPMC, can solely provide for adequate supply of petroleum products to the nation. This is taking into consideration the realities on ground. That is why the fuel scarcity is biting harder at the moment, and may not end anytime soon.
President Muhammadu Buhari has always said that his administration will not adopt any policy that will end up causing hardship for Nigerians.
Unfortunately, the insistence by the Federal Government to hold on to the fuel subsidy regime and artificial pricing controls of petroleum products (PMS & DPK) is already causing untold hardship for practically all Nigerians.
With the over 60% drop in the cost of crude oil prices since last year, a situation that has a direct bearing on the cost of refined petroleum products, the government should use the opportunity to completely deregulate the market now before crude oil prices could rebound.
In addition, the President should as matter of urgency address the foreign exchange policy which has scared away foreign investors who are willing and eager to capitalize on the huge and growing opportunities in a market adjudged only recently as the largest economy in Africa. Such foreign exchange policies must allow for unfettered inflows and outflows of legitimate foreign currencies that would allow forces of supply and demand to impact the current exchange rates positively.
Once these above twin issues highlighted are addressed, all interested Marketers with the capacity shall be better placed to import products directly and sell to the Nigerian public at prices moderated by PPPRA in a way to avoid the creation of unfavourable pricing distortions. With this, the Nigerian public shall have easy access to refined petroleum products at reasonable prices without the current hardship and sufferings.
The way things are going, if not checked, the entire downstream sector of the Nigerian oil and gas industry may be tottering on the edge of collapse. If that happens along with the financial exposures of the downstream companies, the Nigerian banking sector may be adversely affected. As the saying goes. A stitch in time saves nine.